Have we learned our lesson? Insurance carriers have, sort of (p. 2)

In the century since the Titanic sank, how much do you think has changed in the passenger cruise industry? Certainly safety measures improved — every ship has lifeboats enough for everyone on board. Still, the Costa Concordia accident gives one pause: Perhaps it’s been so long since a cruise ship went down that we have all been lulled into a false sense of security. As regulators and law enforcement scrutinize the problems with the Concordia and its Florida-based parent company, insurance companies are reevaluating their risk calculations.

As we mentioned in our last post, the general marine regulatory scheme changed around 1990. Regulators still wanted to make sure that the ship itself was sound, but they decided that corporate culture and internal policies and procedures were just as important. Insurance companies took the new regulations into consideration as they weighed the risk that came every time a liner weighed anchor.

When an insurance company is writing a policy for a trucking company, the underwriter looks at the different states the trucking company operates in. There are certainly federal regulations, but Florida and every other state has its own rules, too. Strict or loose, the regulatory environment in each state has an effect on rates and coverage for that company.

The same is true in the cruise industry. The difference, of course, is that ships travel in national and international waters. The regulatory scheme is exponentially more complicated.

In the United States, the U.S. Coast Guard is responsible for safety standards. Ships flying the U.S. flag must comply with those rules. In international waters, the rules may change, depending on what the International Marine Organization says. The IMO is part of the United Nations. Both the Coast Guard and the IMO have taken their safety cues from maritime disasters.